Publication : Teledotcom
July/ August 2004
Lose Handsets, Not Customers
With cutthroat competition between mobile carriers in Asia's most mature markets, companies need to offer their subscribers additional value-added services if they are to prevent churn and increase ARPU. One effective way to achieve this is to outsource risk to a third-party.
Daniel Currie, US-based VAS business Asurion's president and CEO Asia Pacific, says that a carrier's worst nightmare is churn, which is particularly high in the region due to intense competition and high density of operators in countries like Korea, Japan, Singapore and Taiwan-all countries with mobile penetration rates above 60% and with largely post-paid users.
Currie explains that 20% of subscribers would have equipment problems this year in the region, and that such problems contribute to high churn rates. "However, why not turn a negative customer experience into a positive one by enhancing the customer experience and loyalty?" he asks.
Booz and Allen estimate that among the 20% of customers with incidents, 70% of these are potential churn. Quite a worrying problem for carriers, Currie infers.
And of this figure, handset problems contributed the most to churn rates-currently some 31% in the US. Currie believes the rate in Asia to be even higher as subscribers have a bigger tendency to lose their handsets.
"The key issue is how do you get rid of this 31% churn risk ... by offering insurance and rapid handset replacement programmes," Currie says. By offering handset insurance, data backup services carriers can reduce churn rates while at the same time increase ARPU.
Currie argues that insurance offers subscribers peace of mind, and as a consequence, they are more likely to purchase higher value devices. Downtime too is also considerably reduced, all combining to keeping the consumer online. Indeed, once a claim is verified as true by the company's own trained employees, replacement handsets with a subscribers personal information already loaded on it can be dispatched within 24 hours.
The numbers speak for themselves, Verizon in America offered its customers insurance, and as a result of this, the company was able to reduce its churn rate among policyholder's by some 20%. T-Mobile ran a similar service and was able to make savings of some US$20 million within the first year of its operation.
In Asia, the company says it plans to spearhead its expansion programme from Korea and Japan. Asurion already has partnership programmes running in both countries, and late last year it teamed up with Korea Telecom Freetel (KTF) to offer the carriers new sign-ups handset protection plans.
Asurion's Greater China manager, Lee Kwai Seng, says the business would focus on two areas in Asia this year. These are comprehensive handset insurance-including data backup-and leasing programmes that run for 18 months with a guaranteed residual value put on the phone.
On the insurance side, Lee relates that the company initially believed this would be a hard sell in the region due to consumer aversion to higher charges. However, following consumer surveys in target countries Asurion found that consumers welcomed the added protection, particularly on expensive 3G mobiles. Leasing also offers considerable advantages to both subscribers and carriers, says Lee. Users typically want to replace their phone within nine to 12 months in Asia, and carriers typically pay concessions to retain their best customers. With leasing, Asurion takes over the financing of the phone from the carrier, thus reducing their costs and encouraging customer loyalty. Typically the company will bundle insurance into this programme, thus offering the consumer peace of mind, says Lee.
More importantly to the carrier perhaps, Asurion pays for both the infrastructure and staffing costs of these programmes. In the case of KTF, the company spent US$7 million setting up the programme, training staff and implementing the claim's processing procedures, at little cost to either the consumer or the carrier. This allowed the carrier to concentrate on its core business.